AgdaPkt 2017-09-25 Closed and Joint SA PFA

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returns, as this asset class offers yields that are favorable relative to similarly rated issues in other asset classes. Investment in asset-backed securities is consistent with the City’s investment objectives. Consistent with Code, for investments allowed by this section, staff recommends the Policy require an issuer rated in a rating category of “A” or better and that the issuer’s debt be rated in a rating category of “AA.” Consistent with Code, a maximum allocation of 20% is recommended, and although not required by Code, staff recommends an issuer limitation of 5%. O. Supranational Securities Add language from Code Section 53601 paragraph (q) to permit investment in securities issued by three supranational organizations: the International Bank for Reconstruction and Development, the International Finance Corporation, or the Inter-American Development Bank. Supranational debt is the term for debt of an international or multi- lateral financial agency. Some issuers are international organizations in which the United States is a participant, such as the three permitted by Code. Others, such as the European Investment Bank, are non-US, multi-lateral organizations. Supranational securities have strong credit support from both paid-in and contingent capital calls from their member countries. Much supranational debt is rated “AAA” and is highly liquid— characteristics that most investors desire. In addition, it is issued and available in a wide range of maturities. One of the primary reasons for adding this sector is to open up a new asset class for the City’s portfolio. Having a broader opportunity set is important as the mandated winding down of Federal Home Loan Mortgage Corporation (FHLMC) and the Federal National Mortgage Association (FNMA) will result in reduced Agency supply going forward. In contrast, supranational debt is expected to grow over the same time period. The Policy limitations staff recommends for this asset class are consistent with Code and include investments with a rating category of “AA” or better, with no more than 30% of the City’s funds invested in Supranational securities. Other Minor Changes to the Policy Other minor changes were made throughout the document to update the name of the Subcommittee and the title of Assistant City Manager – Administrative Services, and to disclose the contract for investment services with PFM. Changes were made in two other sections of the policy: VIII. Authorized Financial Dealers and Institutions Language in this section was written so the City Treasurer was responsible for keeping information regarding financial dealers and institutions on file, but utilizing PFM as an investment advisor puts the responsibility of due diligence and review of these parties 6.1.B. - Page 6